What you need to know: The 2016 federal budget

*Editor’s Note: This week, The Daily WRAG is excited to bring you commentary on the recently released 2016 federal and state budgets from leading fiscal policy experts. What issues should you be concerned about in your jurisdiction? How might the proposed budgets affect your grantmaking priorities? Check in this week for an overview of the federal, District, Maryland and Virginia budgets and their implications for some of the most pressing social issues affecting our region. Don’t worry – Maryland’s state budget should hopefully be completed soon. When that happens, we’ll have you covered.

First up, Robert Greenstein, president of the Center on Budget and Policy Priorities, offers his analysis of the 2016 federal budget:

by Robert Greenstein
Center on Budget and Policy Priorities

The budgets that the U.S. Senate and House of Representatives passed in late March would shrink federal spending to strikingly low levels that, measured as a share of the U.S. economy, are unprecedented in modern America. These cuts would seriously affect the ability of states and localities to deliver adequately in areas such as educating children and increasing opportunities for disadvantaged people. Congress’ new budget plans would:

Repeal health reform and cut Medicaid deeply on top of that. The plans would radically restructure Medicaid by converting it to a block grant and cutting federal funding steeply. The Medicaid cut in the House plan, including its repeal of health reform’s Medicaid expansion, would reach $1.8 trillion over ten years relative to current law, adding tens of millions of Americans to the ranks of the uninsured and underinsured. Federal spending for Medicaid and the Children’s Health Insurance Program in 2025 would be a third less than what states would receive under current law, and the cuts likely would keep growing after that.

Deeply cut other federal funding for state priorities. Federal policymakers already have substantially cut the part of the budget that includes support for schools and a wide range of human services (such as nutrition assistance for new mothers and young children, job training, housing assistance, and child care), along with transportation, medical and scientific research, and other programs. Funding for this part of the federal budget — known as non-defense discretionary funding — is set to fall under current law to the lowest levels on record, measured as a share of the economy, with data going back to the 1960s. Yet the House and Senate budgets would cut funding further for this part of the budget. Many of these programs are important to increasing opportunity, productivity, and long-term economic growth.

States are not in a position to absorb major new cost shifts from the federal government. State revenues were seriously damaged by the recent recession, the worst for state finances in 70 years. While revenues are slowly recovering, they remain in a hole, often well below what is needed to meet state needs. For instance, school districts nationally employ 285,000 fewer workers than in the fall of 2008, the first full school year after the recession started, even as the number of students has risen by about 485,000.

Congressional budget plans aren’t laws. Rather, they establish a framework for subsequent legislation. With government remaining divided in Washington, much of what is in the House and Senate budgets won’t become law this year, as gridlock will likely continue. But some aspects of these budgets could be seriously considered — if not now, possibly in 2017. And in any event, continuing gridlock and eroding federal investments in areas important to promoting opportunity pose major problems by themselves, including problems for states and localities.

Robert Greenstein is the founder and president of the Center on Budget and Policy Priorities. He is considered an expert on the federal budget and a range of domestic policy issues, from anti-poverty programs and various aspects of tax policy to health reform and Social Security. He has written numerous reports, analyses, book chapters, op-ed pieces, and magazine articles on these issues.

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